Shared from What Mortgage
Many parents and grandparents who have helped fund a first-time buyer’s property purchase did so by using their own property wealth, a study by Legal & General has discovered.
The so-called Bank of Mum and Dad – or Bank of Family for those who are supported by grandparents – has helped to buy 42% of all homes purchased by buyers under 55 years in 2024, the new research has revealed.
But of those purchases, 19% were made by the parents or grandparents either downsizing, using equity release or remortgaging.
The study, which was commissioned by Legal & General and carried out by the Centre for Economics and Business Research (Cebr), highlights not only the huge contribution being made by the Bank of Family, but how existing property wealth is holding the key to these gifts for many.
The ‘Bank of Family’ is expected contribute to a total of 335,000 housing transactions in 2024 – the largest number of property purchases since Legal & General began tracking lending from family members in 2016. Gifting from parents and grandparents is also predicted to hit £11.3bn by 2026.
Of the fifth of people who are using property wealth, 12% are downsizing, 8% are using equity release and 4% are remortgaging.
Among Legal & General’s customers, 9% used equity release for financial gifting in the first six months of the year.
While gifters who use equity release are required to seek financial advice, the research found the vast majority of parents and grandparents who made a financial gift (74%) did not seek the guidance of a professional before parting with their money.
Lorna Shah, managing director, retail Retirement, said: “Property wealth remains one of the most significant assets for families across the country, so it comes as no surprise that relatives are using it to provide financial support to younger members buying a home.
“Although products like lifetime mortgages are always supported by specialist financial advice, such as Viva Retirement Solutions, it’s important that anyone making a significant gift seeks help from a financial adviser, even if their property isn’t the source of their funds.
“Our research shows that, at the moment, very few parents or grandparents seek out professional advice when offering financial gifts to family members, unless they use a fully advised product such as equity release, and this can impact their finances in the long term.
“As equity release moves more into the mainstream, more people are likely to turn to it for help. The ‘Bank of Family’ is predicted to have a busier year than ever, so we might see more people drawing equity from their property to support their loved ones.”
If you would like to talk to a one of our team of expert equity release advice specialists, to find out how you can help a member of your family get on the property ladder, please contact us to a arrange a free no obligation consultation.
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